However, RNAi operates after the gene has been transcribed, so it is a form of post-transcriptionalgene silencing (PTGS). The gene product is created, but it rapidly degrades and cannot be brought into use. RNAi is PTGS using dsRNA, double-stranded RNA. That is, it is both the gene and its antisense RNA in the one molecule.

The discovery was originally made in petunias. They were surprised to find cosuppression, where not only did the new gene they were injecting fail to work, but it suppressed an existing gene also. The process could occur using viruses as well as transgenes (added foreign genes).

Study then moved to the nematode Caenorhabditis elegans, where it was discovered that the effect was mediated by dsRNA. This is strange, because although the antisense strand could be expected to suppress a gene, the sense strand should promote it. Researchers coined the term RNA interference.

It seems that the double-stranded RNA is taken into a complex including enzymes, and used as a template to know which messenger RNA (mRNA) sequence to attack. This complex is called a RISC, RNA-induced silencing complex. The RNA gene is broken up into very short sequences of so-called guide RNA, which are then multiplied and incorporated into the RISCs. Destroying mRNA prevents the transcribed gene product from accumulating.

Specific genes allowing RNAi to occur have been identified in the usual test species, such as C. elegans, Drosophila, and thale cress. It is speculated that the RNAi ability may be an extremely ancient system, antedating the split between plants, animals, and fungi, for allowing transposons and RNA viruses to be detected and fought.

Lots more detail at (text):
www.ambion.com/hottopics/RNAi/rnai_jun2001.html
and (Flash animation):
www.nature.com/nrg/journal/v2/n2/animation/nrg0201_110a_swf_MEDIA1.html